Continued….

 

Asad Umar has resigned as finance minister of Pakistan. He was provided an exit he availed gracefully. My advice to him would be to stick to the core and resist temptation to become a sacrificial lamb for red herrings. The widely acclaimed poster boy was never cut for this job. Finance is a middle order position while opening batsmen are the home led growth and production. With his acknowledged and proven skills in management, leadership and entrepreneurship, he would have excelled in ministries like information technology, industries and even planning. An excellent opportunity to marshal a new generation of innovators, entrepreneurs and businesses has been missed for now. I blame him for the only reason that he was malleable to praise and laurels that were not his forte. The aura that projected him betrayed his true potential.

The team around him was factually a relic now being overloaded with more of the same. Shameless self-promoters, representatives of the exploitative international monetary order and speculators are positioning themselves to rule the roost. Men of elastic conscience are not worming in; they are dancing back in Bhangra.

It seems that the analysis of Production and Consumption led Growth (Nation: 13 April 2019) never saw daylight. Had the power corridors done so, prevailing conditions would not have unfolded. Important facts and lessons of Pakistan’s political economy were ignored.

What we are witnessing is a recycling of relics with a questionable past. The mantra of the most significant ‘devaluation for exports’ and many others clichés never yielded results. It seems that at least for some time, Pakistan is set to endure more of the same. The damage caused by these men will take decades to recover.

It is not crisis that brings out the best in statesmen and leaders. It is the quality and ability to firewall plethora of self-styled advisors and courtiers. The real test is when a statesman is perched onto a slippery pedestal with the tempting yet contrasting notion of indispensability and vulnerability. That’s when leaders become prey. Fallibility to such praise cost President Ayub Khan, Prime Minister Zulfiqar Ali Bhutto and President Pervez Musharraf. Certainly the agents of yore are orchestrating the old game with a new twist.

This is the ugly face of international shadow overshadowing Pakistan’s economy and politics. At the core of these international concerns are China’s One Belt One Road projects like CPEC, Pakistan’s defence cooperation with China, nuclear capability and uncanny ability of average Pakistanis to survive inflation, price escalation and subsist off a traditional system of rural economy. Yet to chagrin of all, this survival survived centuries and like water will find its own course.

There is no doubt that Pakistan’s financial frontiers are under siege by outside actors with abettors from within. In prevailing environments, it is Pakistan’s biggest vulnerability that can be manipulated to critical governance trajectories.

In the given perspectives, the idea to get into IMF fold was never a bright one; an invitation to intrusion and disaster manipulated by abettors. Disbursement of 6-9 billion dollars with very tight conditions will force many compromises on Pakistan’s security in a hostile environment. It lacked smartness and finesse.

Let us not ignore the second prong which is working in tandem with the international financial order. The questions being asked by Financial Action Task Force (FATF) backing IMF are bound to shake Pakistan’s survival structures. If Pakistan concedes, it could become a spiraling nose dive?

IMF wants an entire breakdown of CPEC investments and loans with China. This was something President Trump and the State Department declared long ago. Why this IMF mantra continued even belatedly is a huge question mark? The indecisiveness melted markets and devalued currency. Most importantly, did the government take Chinese into confidence?

The second relates to Pakistan’s nuclear power reactors. IMF wishes to have all details including financial closure. The most contentious are two new reactors at Chashma being installed with Chinese assistance. It also wants all details on Pakistan’s defence collaboration with China. Why is IMF interested in this now when it ignored it during the two interventions in 2008 and 2013?

The thirds relates to FATF. They are demanding to plug all routes to Pakistan’s irregular and parallel economy. It has asked Pakistan to implement a new set of constraints in crackdown against terror financing, including documenting and regulating all gold markets. The demand reflects Pakistan’s lax financial monitoring and tax controls. Though the demand appears straightforward, it is actually opaque, laden with many implication.

After the breakdown of Gold-Dollar to petrodollars, many countries have been boosting gold reserves as hedge against dollar manipulation. Russia and Malaysia were amongst the first. Now the Chinese have also joined while Yuan has been accepted for international trading.

Pakistan has amongst the world’s largest deposits of gold spread from Chitral to Taftan. Due to lack of vigilance, some of it is being stolen by influential individuals and foreign countries operating in the area. If Pakistan takes off on its own terms, gold will be the major strength. The eyes are therefore on Gold.

Gold in Pakistani has a value in culture. Even the poorest of poor strive to give gifts in gold on weddings. They buy it through bartering crops, properties or through middlemen. It is also the poor man’s bank for the rainy day. These poor live outside Pakistan’s regulated economy. Even if every Pakistani owns one gram of gold (realistic estimate), this means two hundred metric tons of 22 caret gold outside state ownership. Actual figures could be astounding.

Pakistan successfully outlived the 13 years sanctions in 80s and 90s because this economy thrived. Pakistan’s unregulated and parallel economy provides subsistence to Pakistan’s majority. Right now neither the state nor industry and manufacturing sectors provide this relief. Striking at the heart of this unregulated economy will have many implications.

In Pakistan economic activity has already slowed considerably. Monitoring major gold retailers will slow it further. In the absence of cash machines and FBR tools to monitor transactions at this level, the regulated gold markets will be constrained. In one argument, in due course, gold will become an import market. In a contrarian argument, the size of this parallel economy will grow. Reality may lie somewhere in between.

So as proven, Pakistan’s opening salvo was never finance. The engines that power it are home led growth through better agriculture at grass roots and not subsidies for agriculture industries. This aspect needs immediate attention. The next is small scale manufacturing and value addition duplicating as import substitution and exports. This sector also needs immediate attention. Together, these indigenous opening slots can lead Pakistan into a very healthy growth trajectory. These are positions where opening batsmen are direly needed.

The final question remains. If the government continues to pursue policies framed by bloated advisory groups and advisors, will this undocumented economy (with no tangible data) thrive or cause poverty. If it is suffocated, there will be abject poverty. But given historical precedence, it will survive the crises by wriggling out of state and international controls.

 

To be continued…..